A few days ago I wrote that there’s more than one path to $100 million. I argued that while it’s awesome to see that some companies are able to get from 0 to $100 million in ARR in 7-8 years or even less, trying to grow that fast may not be the best choice for most companies.
That raises the question: What are your chances of growing a little slower and still achieving massive success? Considering that most investors are pretty obsessed focused on finding companies that follow the legendary T2D3 growth path (directionally confirmed by the responses to our SaaS napkin survey earlier this year), you might expect that your chances are low.
To answer the question, I took a look at the historic revenue development of ~70 of the largest SaaS companies. A couple of notes (and some caveats) on the data sources and methodology that I’ve used:
- Most of the companies are publicly listed, in which case it was easy to get accurate revenue data from YCharts or from the companies’ SEC filings.
- For private companies, I used various online data sources, including Wikipedia and various blogs. For these companies, the numbers are by their nature less certain.
- All revenue figures are based on GAAP revenue as reported by public SaaS companies, i.e. the numbers do not show a company’s ARR. In most cases, this doesn’t make a huge difference (if all revenue is subscription based, GAAP revenue trails ARR) but note that for companies with a larger percentage of setup fees, revenue from professional services or other non-recurring revenue sources, the difference is bigger.
- Some companies use different fiscal years. As I didn’t want to look into monthly revenue numbers in order to get the exact revenue numbers for each calendar year, I used some simple rules in these cases: If a company’s fiscal year ends on March 31, I allocated the revenue of that fiscal year to the previous calendar year. If the fiscal year ends on October 31, I allocated it to the same calendar year.
- In most cases, the “founded” date corresponds with the year in which the company was founded, but there are a few exceptions, like Slack, which started in 2009 with a completely different product and didn’t launch Slack as we know it today until 2013. In that case, I used 2013 for the “founded” year.
- This is not a scientific project and the data hasn’t been double-checked by anyone so far, so it’s well possible that there are some bugs in there.
Here are my findings:
1.) I estimate that there are over 100 SaaS unicorns
The list contains almost all public SaaS companies and some of the largest privately held ones that I could find public data for. In total, the list contains 70 SaaS companies. All of them are at $100+ million in ARR, and with the exception of one company (Domo), all of them are worth more than $1 billion. I can think of at least 10-20 other SaaS companies that should be added to the list (Talkdesk, Pipedrive, Intercom, OneLogin, AirTable, InVision, Procore, Canva, Asana,...), and I’m pretty sure there are at least 20 further ones that I’m not aware of. That makes it a pretty safe assumption that there are now 100 SaaS unicorns.
2.) The average time-to-$100-million is 10 years
There you have it! :-) Even if you look at a selection of the best of the best SaaS companies, getting to $100 million in 7-8 years is not the norm.
3.) Growth has accelerated in the last decade
If you only look at companies that were started in the last 15 years, the average time-to-$100-million drops to an impressive 8 years. That’s not too far away from the T2D3 path and it shows that it is indeed possible to grow that fast; however, there are also several companies in this cohort that took 10 or more years.
4) Growth rates significantly drop as companies pass through $100 million
In the bottom right corner of the sheet you can see the average y/y growth rates for the year in which the companies hit $100 million and for the following year. As you can see, the average annual growth rate drops from around 75% going in to $100 million to around 50% coming out of $100 million. This is not surprising – as Rory O’Driscoll of Scale Venture Partners explained in this post, growth rates almost always decrease with increasing absolute numbers.
This article by Christoph Janz originally appeared on The Angel VC.